McDonald’s former CEO fined $400,000 following relationship with employee

British-born Steve Easterbrook was fired in 2019 over the relationship, which violated the company’s fraternisation policy.

Easterbrook parted ways with the fast-food giant with more than $40million (£33mn) in a “separation agreement”, the SEC said.

The agreement concluded his termination was without cause which allowed him to keep substantial equity compensation.

“In making this conclusion, McDonald’s exercised discretion that was not disclosed to investors,” it said.

However, in July 2020, McDonald’s claimed he covered up additional relationships with other employees, causing the company to sue Easterbrook for fraud.

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The US Securities and Exchange Commission (SEC) announced on Monday it had “charged” Easterbrook with making “false and misleading statements to investors about the circumstances leading to his termination”.

The 55-year-old is also barred from serving as an officer or director for any SEC-reporting company for five years.

The regulator said both Easterbrook and McDonald’s were not honest with investors about the reason that led to Easterbrook’s termination, and this “allowed him to retain substantial equity compensation that otherwise would have been forfeited”.

Gurbir Grewal, the director of the SEC’s division of enforcement, said: “When corporate officers corrupt internal processes to manage their personal reputations or line their own pockets, they breach their fundamental duties to shareholders, who are entitled to transparency and fair dealing from executives.

“By allegedly concealing the extent of his misconduct during the company’s internal investigation, Easterbrook broke that trust with – and ultimately misled – shareholders.”

The SEC’s order also found that McDonald’s violated Section 14(a) of the Exchange Act and Exchange Act rule 14a-3, and the company has consented to the SEC’s cease-and-desist order.

The commission said it did not fine McDonald’s “in light of the substantial cooperation it provided to SEC staff during the course of its investigation”.

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Reward Strategy has contacted McDonald’s for comment.

McDonald’s told CNBC in a statement: “The Company continues to ensure our values are part of everything we do, and we are proud of our strong ‘speak up’ culture that encourages employees to report conduct by any employee, including the CEO, that falls short of our expectations.”